Slide 1: Results Presentation for the Year Ended 31 December 2015
RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2015 Presented by Zanele Matlala (CEO) and Kajal Bissessor (FD) Presented by Zanele Matlala (CEO) and Kajal Bissessor (FD)
Slide 2: Legal notice/disclaimer
Legal notice/disclaimer This presentation is published solely for informational purposes and does not constitute investment, legal, tax or other advice nor is it to be relied upon in making an investment decision. Information contained herein has been taken from sources considered by Merafe Resource
Slide 3: Key Agenda
KEY AGENDA Introduction 01. Year in review 02. Operational review 03. Market review 04. Financial review 05. Outlook Annexures 3 Merafe Resources Ltd | Results presentation for the year ended 31 December 2015
Slide 4: Introduction
Introduction • Challenging year • Slow down in global economy • Decline in commodity prices • Weaker emerging market currencies 4 Merafe Resources Ltd | Results presentation for the year ended 31 December 2015
Slide 5: Year in review
Year in review 5 Merafe Resources Ltd | Results presentation for the year ended 31 December 2015
Slide 6: 2015 year in review
2015 year in review OPERATIONAL MARKET • TRIFR of 4.17 • 0.5% decrease in global stainless steel • Ferrochrome production of 377kt production • Rand production costs well • 2.2% decrease in global ferrochrome demand contained • 4.6% decrease in global ferrochrome production • 10.9% increase in chrom
Slide 7: Operational review
02 Operational review 7 Merafe Resources Ltd | Results presentation for the year ended 31 December 2015
Slide 8: Operational review
Operational review • Increase of 13% in ferrochrome production – Project Lion II • TRIFR of 4.17 • Wage negotiations – Western mines – agreement reached in 2014 – Eastern and Western smelters – agreement reached in 2015 • Community unrest • Electricity – Supply – Pricing 8 Merafe Resources Ltd | Res
Slide 9: Market review
03 Market review 9 Merafe Resources Ltd | Results presentation for the year ended 31 December 2015
Slide 10: Global market review
Global market review GLOBAL STAINLESS GLOBAL Sales GLOBAL STEEL PRODUCTION FERROCHROME FERROCHROME DEMAND PRODUCTION 0.5% decrease to 2.2% decrease to 4.6% decrease to 41.6mt 11.1mt 10.7mt 0.5% NAFTA 29.6% NAFTA 1.1% South Africa 8.4% Japan 4.7% EU 4.7% EU 1.4% China 2.1% China 9.0% China 6.8% India
Slide 11: Chrome ore imports into China
Chrome ore imports into China 2013Sales 2014 2015 % change '000 t '000 t '000 t 2015/2014 South Africa 6 736 5 748 7 579 31.9 Turkey 1 988 1 280 1 037 (19.0) Albania 677 555 486 (12.4) Iran 428 494 392 (20.6) Oman 687 489 337 (31.1) Pakistan 482 339 302 (10.9) Madagascar 118 113 170 50.4 Philippines
Slide 12: Ferrochrome market review
Ferrochrome market review European benchmark ferrochrome prices Sales 2014 USc/lb 2015 USc/lb % change Q1 118 108 (8) Q2 122 108 (11) Q3 119 108 (9) Q4 115 104 (10) Average 118.5 107.0 (10) Average Rand/US Dollar exchange rate 2014 2015 % change 10.9 12.8 +17 12 Merafe Resources Ltd | Results presen
Slide 13: Financial review
04 Financial review 13 Merafe Resources Ltd | Results presentation for the year ended 31 December 2015
Slide 14: Key financial features
Key financial features Sales 23% 38% 65% REVENUE EBITDA HEPS HEPS (cents) 16 13.9 14 12 10.8 10 8.4 8 6.4 6 5.1 4 2 - 2011 2012 2013 2014 2015 14 Merafe Resources Ltd | Results presentation for the year ended 31 December 2015
Slide 15: Revenue up by 23%
Revenue up by 23% 18% 10% 17% 21% 42% Average European Average Ferrochrome Ferrochrome Chrome ore benchmark Rand/US$ sales tonnes revenue revenue ferrochrome price exchange rate 2015 : 372kt 2015 : 107USc/lb 2015 : 12.8 2015 : R3 946m 2015 : R482m 2014 : 316kt 2014 : 118.5USc/lb 2014 : 10.9 2014 : R
Slide 16: Production costs well managed and contained
Production costs well managed and contained Key contributors • Lion II • Cost saving initiatives • Good cost performances Global Ferrochrome cost curve • Glencore-Merafe Venture (second lowest cost producer) • Three SA producers in business rescue/liquidation • One SA producer – section 189 applicat
Slide 17: EBITDA reconciliation to profit
EBITDA reconciliation to profit 900 852 800 (36) 700 600 500 (274) R'm (63) 400 343 (64) 300 (72) 200 100 0 Merafe's 20.5% Corporate costs Depreciation and Net financing Current tax Deferred tax Profit of EBITDA from impairment costs expense expense the Venture 17 Merafe Resources Ltd | Results pres
Slide 18: Balance sheet
Balance sheet As at As at 31 December 2015 31 December 2014 Audited R’000 Audited R’000 Total non-current assets 3 258 365 3 252 680 Property, plant and equipment 3 240 370 3 239 162 Deferred tax assets 17 995 13 518 Total current assets 2 099 240 2 148 467 Inventories 1 445 887 1 435 799 Current ta
Slide 19: Balance sheet
Balance sheet As at As at 31 December 2015 31 December 2014 Audited R’000 Audited R’000 Total non-current liabilities 1 378 977 1 366 153 Loans and borrowings 472 755 549 909 Share based payment liability 3 147 – Provision for close down and restoration costs 139 351 129 029 Deferred tax liability 7
Slide 20: Cash flow, debt and facilities
Cash flow, debt and facilities Net (overdraft)/cash movement R'm 1 200 1 000 956 800 600 400 310 200 (162) (44) (259) (45) (57) (79) 0 (200) Net overdraft at 31 Cash flows from Expansionary capex Sustaining capex Dividends paid Decrease in Others Net cash at 31 Dec (400) Dec 2014 operating activitie
Slide 21: Outlook
05 Outlook 21 Merafe Resources Ltd | Results presentation for the year ended 31 December 2015
Slide 22: Conclusion and outlook
Conclusion and outlook • Short-term (2016 – 2017) – Weaker prices – Modest growth in stainless steel production – Reducing debt to R300m – Stable to increasing dividends • Long-term (2018 onwards) – Stainless steel production – healthy growth rates – Free cash-flow applied to returning cash to share
Slide 23: Questions
Questions 23 Merafe Resources Ltd | Results presentation for the year ended 31 December 2015
Slide 24: Annexures
Annexures 24 Merafe Resources Ltd | Results presentation for the year ended 31 December 2015
Slide 25: Global Ferrochrome cost curve
Global Ferrochrome cost curve 140.0 © Heinz H. Pariser 120.0 Cost in US$ ct per lb Cr Content 100.0 Charge Cr Benchmark (2016 Y-t-D): US$ ct 92 per lb 2015 80.0 China Tender (2016 Y-t-D, excl VAT): US$ ct 58 per lb (50% Cr) 60.0 2016 Average C3: US$ ct 63.6 per lb 40.0 20.0 0.0 0.0 20.0 40.0 60.0 80
Slide 26: Ferrochrome prices
Ferrochrome prices 1.50 1.50 Charge Cr Charge Cr HC Spot Prices & China Tender Price 1.40 Benchmark (Japan) Benchmark (EU) 1.40 Charge Cr Prices (quarterly) in US$ / lb 1.30 1.30 (monthly) in US $ / Ib 1.20 1.20 1.10 1.10 1.00 1.00 0.90 0.90 0.80 0.80 Europe USA 6-8%C, 60%Cr 6-8%C, 60-65% Cr 0.70 0.